OTTAWA – Canada Post’s $6.5-billion pension shortfall is just a fraction of the more than $150 billion in unfunded pension liabilities facing the federal government for its employee pension plans, raising new questions about the solvency of those plans, benefits for workers – and costs for taxpayers.

The multibillion-dollar unfunded pension liability facing Canada Post is crushing the Crown corporation and contributed to some of the sweeping changes announced this week, including receiving temporary pension relief from the federal government, increasing the price of sending letter mail, and ending door-to-door delivery in urban areas.

The federal government, however, is staring down similar pension headaches across its departments, agencies and Crown corporations.

The total unfunded federal public sector pension liability currently sits at more than $151 billion, according to recently tabled public accounts, leaving a huge bill for taxpayers to cover in the future.

“It’s unpaid. It’s $151 billion that hasn’t been funded,” said Alexandre Laurin, associate director of research for the C.D. Howe Institute, a public policy think-tank keeping a close eye on public sector pensions.

“You have to pay it off, so you need budgetary surpluses or higher taxes in the future.”

And there’s another $67 billion in “other employee and veteran future benefits,” bringing the total unfunded liability to approximately $219 billion, according to the public accounts.

Laurin said the government, through its accounting methods, is low-balling the unfunded pension liability.

Public accounts list the pension shortfall at $151 billion, but the fair value of the pension liabilities is actually much higher, around $270 billion, he said, although it hasn’t been accounted for yet in the books.

The unfunded pension liability has grown to $151 billion today from about $127 billion in 2004. Combined with the “other employee and veteran future benefits,” the total liability has grown from $167 billion in 2004 to today’s $219 billion.

The federal government’s pension plight is getting worse due to continually low interest rates and smaller returns on pension funds.

Ottawa currently has a number of defined-benefit pension plans, which are indexed to inflation, covering almost all employees in the public service and public sector corporations.

The pension difficulties facing Canada Post are symptomatic of problems for other Crown corporations and across government, said Ted Mallett, vice-president and chief economist of the Canadian Federation of Independent Business.

“Something is going to break,” Mallett said Friday.

“It’s time to start getting realistic about the assumptions about these pension plans; make sure they’re based on solid fundamentals so that you don’t get this kind of massive system breakage down the road. We’re seeing the first sign of it with Canada Post.”

The mounting shortfall for federal public sector pensions ultimately means smaller retirement benefits for workers, higher taxes for Canadians or reduced services across the country, he said.

“It’s going to, we think, have to affect benefits down the road for the people who thought they were going to be receiving secure benefits,” Mallett said.

The Conservative government passed legislation about a year ago that will see public servants increase their pension contributions to 50 per cent (from less than 40 per cent at the time of the changes), with the government and taxpayers covering the other half.

As well, all new federal workers who join the public service will see the normal age of their pensionable retirement rise to 65 from 60.

The federal government said at the time it expected the changes to public sector pensions would save taxpayers almost $2.6 billion over five years.

“Even with the 50-50, we don’t think the funds would be sufficient to pay the promised pensions. Right now, the assumption is the taxpayers will just ante it up,” Mallett said.

Senior Parliament Hill reporter for the Ottawa Citizen, politics junkie, wannabe pro golfer and someone who has wordsmithed at newspapers in Ontario, Alberta and Saskatchewan. I've covered politics at... read more every level, including city hall in Ottawa and Calgary, the Alberta legislature in Edmonton and now back in Ottawa covering the Hill.View author's profile